Huge solar farm proposed south of Silicon Valley wins power contract, but loses major investor

By Paul Rogers progers@mercurynews.com

Posted:
08/25/2014 06:12:53 AM PDT

Updated:
08/25/2014 06:13:21 AM PDT

A proposal to build one of the world's largest solar farms in a rural area south of Silicon Valley has cleared one of its final hurdles after five years of planning and environmental debate.

But whether the 247-megawatt facility proposed for Panoche Valley, a vast expanse of rangeland 50 miles south of Hollister, is ever built will depend on it securing final environmental permits and new investors to bankroll construction.

Earlier this month, Southern California Edison announced it has signed a 20-year contract to purchase electricity from the proposed San Benito County solar farm. Such "power purchase agreements" are critical for large solar projects to move forward because they guarantee customers for their power and a steady revenue stream for their investors.

"It's a major milestone in the development of Panoche Valley Solar," said John Pimentel, president of PV2 Energy, a San Francisco firm developing the project. "It allows us to now move forward with our plan to begin construction early next year."

Several environmental groups have fought unsuccessfully for the past five years to kill the project. They contend it would change the rural character of the area and harm endangered species such as the San Joaquin kit fox and blunt-nosed leopard lizard. And they vow to continue to oppose it.

"We were hoping that no major utility would pick up a project that is so controversial and so unfortunately placed in an environment that is one of the last resorts for endangered species who rely on that habitat," said Shani Kleinhaus, environmental advocate for the Santa Clara Valley Audubon Society.

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The $600 million project -- originally proposed as a larger, $1.8 billion project -- still faces several significant challenges.

Duke Energy, the North Carolina utility giant, has withdrawn as a major investor. As recently as a year ago, Duke and PV2 were partners, and the address of the legal owner, Panoche Valley Solar LLC, was the same as Duke's headquarters in Charlotte.

Now Duke is a minor investor, Pimentel confirmed, and will not be financing construction.

"Their corporate strategy evolves and changes all the time," he said. "The California market has changed a lot in the last couple of years. Prices have become extremely competitive, and Duke has had other corporate strategic issues that have demanded greater focus."

Duke officials declined to provide details about why the company withdrew as a major partner or what percent ownership it has now.

"We buy and sell assets all the time," said Duke spokesman Tom Williams. "It's not at all unusual."

Pimentel said he already is in talks with "all the top players in the industry" to help fund the project. He said he expects "one or more" will become partners soon and ground will be broken next summer.

Utilities in California are under major pressure to sign more deals for solar and wind power because a 3-year-old law signed by Gov. Jerry Brown requires them to provide 33 percent of their electricity from renewable sources by 2020. The state's three largest utilities are now at about 21 percent, according to the California Public Utilities Commission.

The second challenge for the Panoche Valley project is securing endangered species permits from the U.S. Fish and Wildlife Service and state Department of Fish and Wildlife.

Pimentel said he doesn't expect the permits to be denied. The solar project already has an approved environmental impact statement, he noted. And although its 1 million photovoltaic panels will cover 1,629 acres, Pimentel said, his company has options to purchase 24,176 acres of surrounding ranchland as permanent open space to offset the impacts to wildlife.

Courts have so far supported that position. After the San Benito County Board of Supervisors voted to approve the project in 2010, the Santa Clara Valley Audubon Society, the Sierra Club and a local group called Save Panoche Valley sued to block it, arguing it would harm birds and endangered species.

But a San Benito County Superior Court judge rejected that lawsuit in 2011. And last year, a state appeals court also rejected it. The environmentalists, who have not filed a further appeal, are now urging the wildlife agencies to deny the permits.